Lakala Founder: Third-party Payments Service Are the New SPs and Banks New Telcos

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Sun Taoran is a respected serial entrepreneur and a bestselling author on building startups. He started his first business back from publishing a weekly IT magazine and then shifted to the second company Bluefocus, also the first listed PR company in China. Later on he began to make mobile phones branded Hi-Tech Wealth (also named as the mobile PC), which was quite a hit at the early 00s.. He started up a total of seven companies in different fields and the most recent one is Lakala.

Now founder and chairman of Lakala, one of the biggest third-party payments services in China, Mr. Sun revealed to local media about how he came up with the idea of building such a company and his thoughts on third-party payments sector in China.

“Since Chinese telecom industry opened up in 1996, (2-2.5G) service providers grew rapidly for a decade. As the financial industry now goes toward a much opener and freer environment, I’m sure the service providers in finance will be the next golden opportunity embracing huge potential,” said Sun.

Hearing Sun’s idea of marching into ‘convenient financial service’ field in 2005, many people shrugged off. Even his earliest investor Lei Jun, now CEO of Xiaomi, had no idea how this business mode would work. “Starting a business was very simple actually. Figure out people’s needs, make products that can meet the need, and sell,” that’s what Sun’s philosophy goes.

And he did carry out according to his philosophy. After China joined WTO in 2001, Chinese financial industry has opened up step by step. “I found out that even in those major cities in China, people find much difficulties in fulfilling payments. There’s always a long long line in the banks. Plus at that time few banks focused on promoting credit cards, which brought more troubles to the small group of credit cards users when repaying. On the other side, small-sized merchants or convenient stores can not afford the POS terminals…” So he decided to develop a smart terminal to solve the problems, which later growing into Lakala.

Currently the payment service has covered more than 300 cities with over 75,000 convenient terminals in convenience stores and other public spaces and, making the biggest convenient financial service network. Data showed that last year over 20 million people had their payments done through public terminals. Moreover, by the end of 2012, the accumulated users of Lakala had already hit 50million with transaction number of over RMB 600billion.

“What we offer is a convenient channel for both sides. For the users, they just need a minute’s walk to a convenience store to pay the monthly water rate, fining bills, or paying off the credit cards, purchasing a movie ticket…For the merchants, a popular payments service surely attracts more customers thus help them profit more.”

Well, when everything seemed right as rain, Sun instead felt upright. “I realized that mobile Internet, e-commerce and SNS would make revolutionary changes on people’s life. If we don’t fit in this trend, we will be left behind.” So in May 2012, Lakala released a mobile payments device called Koala, a Square-like card reader attached to the mobile phones. About this mobile transition, Sun had an ambition to be “On the first screen of our users’ smart phones”.

Accordingly, Lakala’s revenues mainly come from convenient financial service, POS and mobile payments. Currently the third covers 15% of the total revenues and 20% of the profits, and the first two share similar percentage. “We hope that in the future the revenue distribution of the three sectors will be even.”